Markets falter in response to China, Mexico export news

March 7, 2019

U.S. Agriculture Secretary Sonny Perdue tweeted the news that Chinese officials planned to purchase 10 million metric tons of U.S. soybeans.

What he referred to as a "good faith" gesture occurred during trade talks between the two countries, and Purdue said it was an indication of "more good news to come."

Initially, the futures markets responded positively as Globex futures were sharply higher and at their highest levels in premarket trading.

But the rebound didn't last long.

Chad Hart, agriculture economist with Iowa State University, said that the markets heading into March showed both corn and soybean prices were down.

"They've committed to buy some, but the question is when," he said. "How quickly will we see them come into market play?"

He added the good news that Mexico purchased 279,400 metric tons of corn only briefly rallied the markets.

"It's definitely nice to see two of our biggest customers stepping up to buy more, but the markets are responding by going 'eh,'" Hart said. "Weekly data shows that Mexico has been stepping into the market a little more aggressively this year than last year and we were seeing decent sales in Mexico year over year, which is the type of growth we like to see, but it just isn't quite enough to drive the market to higher heights."

Interestingly, corn exports are heading to Mexico, Japan, South Korea and Taiwan with solid sales figures. The loss in numbers actually stems from "unknown destinations," according to Hart.

"Sales actually are up in Mexico 18 percent, 20 percent in Japan, 28 percent in South Korea and 26 percent in Taiwan, but 'unknown destinations' are down 76 percent," he said.

While the deal with China may be considered a "good faith effort," Hart said it's "too little too late."

"We're still down 600 million bushels to China even with them agreeing to buy more," he said. "It won't catch us back up. But it is promising. Hopefully this is the start but it's not big enough yet."

Dr. Sam Funk, director of agriculture analytics and research for the Iowa Farm Bureau Federation, said any sign of help moving corn and beans is positive.

"When you think about how much product we have on the ground, it's obvious that we need to have those markets opened up," Funk said. "We outproduce what we consume domestically. Hopefully this will move markets higher, especially long term. We are very good at providing production for both domestic and global export markets."

Ag officials say it's critical that Mexico and China return to being key players in America's export marketplace. Funk noted that anytime something disturbs the marketplace, such as trade disputes, it hampers market growth and progress.

"We want to free up those burdens and continue moving those stocks," he said. "It's obvious the hope of American farmers and Iowa farmers is that we're able to support those marketplaces and produce some of the safest ag products in the world. Providing the world with access to those is important. We want to continue to move those stocks."